“Tied House” laws, explained by a brewer they affected

On Wednesday, pretty mucheverybody in the city reported that Like Minds, an upstart Milwaukee brewery (which, to this point, has been brewed and bottled at Hinterland Brewery in Green Bay), decided to relocate to Chicago due to a vague “state statute” prohibiting Wisconsin brewery owners holding a retail liquor license in another location. Since Justin Aprahamian, owner of Sanford, is part owner of Like Minds, the brewery was essentially forced to either dissolve or move out of state. They chose the latter, costing Milwaukee a respected young brewery in the process. In April, the same law forced chef Karen Bell to depart from Company Brewing due to her other business, Bavette, already holding a retail liquor license.

With “Tied House” laws playing a growing role in Milwaukee breweries and restaurants, we decided to get a better idea exactly of what these increasingly-referenced state statutes are, why they were put into place, and the impact they could have on future culinary and craft brewing development in the city. To help us sift through the legalities, we figured there was no better resource than someone directly affected by them. When Tommy Vandervort started Enlightened Brewing Co., he was forced to quit his job as a bartender, even though he never held a management position. In addition to getting his own brewery off the ground, he now works more hours at a second shift office job for less money. He wrote a thorough explanation of the legal hurdles he faced and his understanding of “Tied House” laws.

From what I was told by Special Agent Georgeann King of the Alcohol and Tobacco enforcement wing of the Wisconsin Department of Revenue, the source of all the strife for us, Company [Brewing], and Like Minds comes from the old “Tied House” laws that were enacted just after prohibition. From what I understand, Schlitz, Pabst, Blatz, Old Style, and probably Miller and the rest of them would buy bars or approach bar owners and offer to furnish everything in their bars, including super elaborate back bars, tap systems, tables, and decorations in exchange for them agreeing to only serve that brewery’s product and nobody else’s. There are some economic reasons for that as well—the big breweries engaged in some pretty aggressive price fixing and collusion in those days—but the idea was that those bars were “Schlitz Houses” or “Pabst Houses.” You can still see evidence of these Tied Houses at some of the old bars around Milwaukee that have those signs hanging outside that say Pabst of Old Style or whatever.

Well, lawmakers decided that this was unfair because other smaller breweries weren’t allowed to compete in the same marketplace because they couldn’t afford to create Tied Houses of their own, and they weren’t allowed to sell to bars that were already tied to other breweries. There’s a pretty good video on the history of beer and bars in Wisconsin that has a good section on Tied Houses. Nowadays, the laws are strictly enforced to establish a firm three-tiered system of alcohol consumption, production, and distribution, so that an individual is not legally allowed to work on any two of those tiers. Someone that works as a bartender can’t work for a distributor or a brewery or any other combination you could come up with. Also, there are all kinds of rules about what a distributor can provide to a brewery or a retailer and all those other combinations. A distributor is only allowed to furnish a certain amount of things of value to a retailer or a brewery. This is all meant to prevent the types of collusion that existed in the times just after prohibition and to maintain a marketplace that has fair rules of competition for everyone involved.

Unfortunately, it also means that even if you’re someone like me—an hourly employee of a restaurant who has no ordering power and doesn’t make any management decisions—you can’t get the permit you need from the state if you own a brewery. They wouldn’t even let me work as a dishwasher. I could not be employed in any capacity by any employer that holds a retail liquor license. In Company and Like Minds’ cases, it’s a little more clear cut, because there were actually owners of restaurants trying to get involved in the ownership of a brewery that would distribute beer off-premises. Obviously, Justin [Aprahamian] could favor Like Minds beer at Sanford, and Karen [Bell] could favor Company beer at Bavette, and that’s exactly what the laws are trying to prevent. But for me, and for Enlightened, we don’t have anywhere near the resources to influence the ordering of any restaurant, and I’ve never been a manager anywhere, so I’ve never had a role in ordering decisions. The law was enforced the same either way.

Honestly, I think I can reasonably understand why the laws were passed and why they’re still enforced today, but it doesn’t seem like they’re enforced uniformly. Ask any bar or restaurant owner, or bigger brewery owner, or someone who works for a distributor if they’ve received favors, tickets to beer festivals, free merchandise, hotel rooms or dinners from someone on a different tier, and they’d be lying if they told you no. I understand why the law is enforced when it comes to bigger breweries who have a lot of resources, because they have the power to seriously influence what bars and restaurants are doing, and they’re more than able to crush the little guys to eliminate competition. But an unfortunate consequence of the law and its rigid enforcement is that it prevents smaller communities within cities like Milwaukee from collaborating and doing fun things together, even if that means partnering up in ownership, which I totally think should be allowed. If you’re a restaurant owner that only has one or two spots and you have no intentions of taking over the world, like Lowlands Group or something like that, or you’re a brewery that makes way less than 1,000 barrels a year—which is a drop in the bucket compared even to breweries like Three Floyds or Furthermore or Lakefront—then I feel like you should be able to partner up without these laws getting in the way.

If the intent of the legislation is to maintain a market with fair competition, I don’t see how allowing small operations like us and Company to create smaller nano-partnerships throws a wrench into that. I don’t know, I’m not saying throw the baby out with the bathwater, but these laws haven’t even been looked at, much less amended, since the ’60s or ’70s at the most recent. There were some changes in legislation in 2011, I think, that allowed breweries to self-distribute up to 300,000 barrels (which is absolutely ridiculously huge for self-distribution) and prevented breweries from owning distributors and some other changes that were a big confusion. But they didn’t make any changes that reflected the current climate of craft beer in Milwaukee and Wisconsin and the United States. I’m not sure what the answers are, but I really think we can make some changes to modernize these laws while maintaining the protections they offer. We could create a really awesome nano culture of beer and bars and restaurants if we allowed smaller producers and owners to do their thing.

I think it sucks that Like Minds won’t be located in Wisconsin, because those guys are Milwaukee guys, and they’re killing it here. I was telling John Lavelle Wednesday on the phone that I’m really happy for him that he’s going to be able to start up one way or another and I’m proud of them for not throwing in the towel despite some adversity, but they were making some kick-ass beers on another person’s system, so I can only imagine, especially with the team they lined up, what they will be able to do on their own. I wish they could maintain their presence in Milwaukee. From my perspective, the more breweries in Milwaukee, the better. And yeah, we have MKE and Lakefront and Sprecher, but let’s be honest, smaller scale breweries are more accessible and more fun. Also, from an economic perspective, I’m sure that Like Minds is still going to try to sell their beer in Milwaukee and Wisconsin, but they won’t be paying Wisconsin taxes. And you can bet your ass they’re going to be pushing their beer at Sanford, which is totally legal now because of their chosen location. Also, let’s say they get to be as big as MKE or Lakefront, which is still relatively small compared to New Glarus, New Belgium, Dogfish Head and the rest of them; well, you can kiss those jobs goodbye for the State of Wisconsin.

I don’t know, man. I understand the spirit of the law and I believe I understand the history, but there’s something that’s clashing with the current climate of breweries and food and beverage and it’s getting in the way of making the city better, I think. Something I don’t understand is the interest involved in keeping these laws in place. I don’t know if it’s just custom or convenience or money, but there are a lot of players in this game and it’s hard to tell where they all land on this issue.

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